Ben Akabueze, director-general of the federation’s budget office, asserts that Nigeria’s ability to borrow continues to diminish due to its inability to service its debt.
Wednesday in Abuja, Akabueze spoke during the inauguration of newly-elected members of the tenth national assembly.
He stated that, unlike other countries, the country’s budget to gross domestic product (GDP) ratio is less than its requirements.
“While the size of the federal government’s budget for 2023 generated some excitement, the total budgets of all governments in the country total approximately N30 trillion.” This represents a ratio of less than 15 percent to GDP, as stated by Akabueze.
Even on the African continent, the proportion of expenditures is approximately 20%. South Africa is approximately 30 percent, Morocco is approximately 40 percent, and 15 percent is insufficient for our requirements.
Therefore, competition for the limited resources is intense. This can determine our relative borrowing capacity. Our current borrowing capacity is extremely constrained, not because our debt to GDP ratio is high, but because our revenue is insufficient to support the magnitude of our debt. This explains why our debt service ratio is so high.
“Once a country’s debt service ratio exceeds 30 percent, that nation is in trouble. Ours is approaching 100 percent, which demonstrates how dire our situation is. We have limited borrowing capacity.
“The size of the budget is determined by how much you can generate in terms of revenue and how much you can reasonably finance. The next step would be to consider government priorities regarding which projects receive funding.
Budgets are not purchasing lists. The final budget contained only expenditures.”
Minister of finance, budget, and national planning Zainab Ahmed stated earlier this year that the budget deficit for 2023 is N11.34 trillion, or 5.03 percent of the country’s gross domestic product (GDP).
Ahmed stated that the budget deficit would be financed primarily through borrowings, with N7.04 trillion coming from domestic sources, N1.76 trillion from foreign sources, N1.77 billion from multilateral and bilateral loan drawdowns, and N206.18 billion from privatisation proceeds.
Nigeria’s total public debt reached N46.25 trillion in December 2022.
Recently, the senate approved retroactively a N22.7 trillion loan that had been used by the executive branch.
Wednesday, President Muhammadu Buhari requested authorization from the Senate to borrow $800 million from the World Bank.
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